Tax system contributing to widening inequality - report
What you need to know:
- Burdens. A poorly built tax system, according to experts, burdens the poor more than the rich.
Kampala. The current tax system is not only regressive but perpetuates inequality, a report examining Uganda’s tax fairness has said.
The report titled: Fair Tax Monitor Uganda, indicates that whereas taxation can be used as a tool to raise government revenue, re-price goods and services as well as redistribute income and wealth within an economy, it can increase inequality.
Speaking at the launch of the report in Kampala yesterday, Ms Regina Navuga, the programme officer at Seatini-Uganda, a trade and fair taxation advocate, said taxes must be mobilised in a fair and just manner to create an environment that allows businesses to prosper.
“In the 2018/19 financial year, Uganda introduced new taxes such as Excise Duty on Over the Top services and on transaction values of Mobile Money. As a result of the tax on mobile money, a cross section of Ugandans, especially the poor and marginalised were highly impacted. This is partly attributed to the fact that limited efforts are directed towards research on the impact of tax policies before they are enacted,” she said.
The study, which was commissioned by Seatini-Uganda and Oxfam, found that the largest section of the population, majority of whom are poor, bear the blunt of the tax burden at the expense of the rich.
This, Ms Navuga said, has created a scenario where the poor are contributing more to the Treasury than the poor.
Generous incentives, which are usually taken advantage of by foreign investors, the report found, has also seen Uganda lose nearly Shs850b in revenue between the 2011 and 2017.
This is slightly more than the budget that was allocated to the Agriculture Ministry in 2017.
Much of Uganda’s tax system is built on an indirect system, which, according to Mr Corti Paul Lakuma, a research fellow at the Economic Policy Research Centre, is regressive because it burdens the poor more than the rich.